Akshaya Tritiya 2022: Akshaya Tritiya in India is considered an auspicious day to buy gold and add it to one’s investment portfolio, and with the day just around the corner, investors want to get their hands on the precious metal. In the traditional Indian household, gold is still one of the best and safest investments to make, and for them, physical gold is always the best option. However, there are other ways in which one can buy this Akshaya Tritiya gold, for example gold bonds, gold ETFs or digital gold.
It should be noted that physical gold, gold bonds, gold ETFs, or digital gold are taxed differently. But do you know how much tax you have to pay for gold if you buy the asset? Read on to know.
Physical Gold Tax
Akshaya Tritiya 2022 falls on May 3rd, which is tomorrow, and will be a big day for Indians looking to buy gold. Physical gold, the most common form of gold, attracts 3 percent GST (Goods and Service Tax) at the time of purchase.
Apart from this, physical gold also attracts taxes during its sale. “The taxation of the physical form of gold (precious metals, coins, jewelry) and digital gold (purchased online through e-wallets, brokers) depends on the retention period of the investment,” said Archit Gupta, founder and CEO of Clear.
“If you sell physical gold within three years of purchase, you are accruing short-term capital gains (STCG), which are taxable at your income tax rates. However, the sale of such form of gold after three years of investing is taxed at 20.8 percent. (including surrender) with the indexation benefit,” he said.
Digital Gold Tax
“In the case of digital gold, there are no taxes on holdings of less than 3 years, in other words, there is no short-term tax on digital gold,” said Vijay Singhania, President of TradeSmart.
Digital gold can be bought in popular digital wallets including Paytm, Amazon Pay, Google Pay and PhonePe, priced from just Rs 1. 20 percent tax rate plus a 4 percent cession above that,” Singhania said.
Taxation on Gold ETFs and Sovereign Gold Bonds
There is another form of gold called paper gold, Archit Gupta said. Paper gold includes Gold ETFs, Gold Mutual Funds and Sovereign Gold Bonds (SGBs). These forms of gold have become popular among investors in recent years. But what is the gold tax in the case of these categories?
Gold ETFs and Gold Mutual Funds are taxed in the same way as physical or digital gold, Gupta explained to News18.com. “SGBs, however, have different tax rules. Semi-annual interest of 2.5 percent per annum from SGBs is taxable as income from other sources in the year of receipt,” he added.
In this regard, one should also bear in mind that Sovereign Gold Bonds have a maturity of eight years. “The capital gains are tax-free if the SGBs are repaid on the maturity date. However, investors can redeem SGBs early after five years. If SGBs are redeemed within five to eight years, the gains are long-term capital gains and are taxed at 20.8 percent (including surrender) with the indexation benefit,” Gupta said.
“In addition, investors can buy and sell SGBs through the exchange. In such cases, if SGBs are sold on the exchange before three years, the capital gains will be added to the investor’s income and taxed based on the applicable income tax rates,” he said.
“And if the investors sell SGBs through the exchange after three years, it will be a long-term capital gain and taxed at 20 percent with indexation benefit,” added the CEO of Clear.
Market experts, Gupta said, advise investors to focus 5-10 percent of their investment portfolio on gold investments. So Akshaya Tritiya 2022 is a good time to start the journey now that you know all about gold tax.
Read all the latest news, breaking news and IPL 2022 Live Updates here.